Most people are invested in the stock market in some way. Whether it’s mutual funds, individual company stocks, or a Roth IRA, most investment platforms are based in the stock market. Of course, as you invest more of your money in the stock market, you might be watching your accounts dip and swing. Financial crises like the one in 2008 might also deter you from investing; what if you lose it all?

To address these concerns, we want to walk you through what a realistic investment experience is like — so you are prepared for what happens during up and down markets. We don’t want to glamourize it; we want to show you exactly what you can expect. For example, almost every year, there is a solid 10% drop in the stock market (US S&P 500). This is a consistent occurrence, and we always inform Guiding Wealth clients of this trend ahead of time so they can manage their expectations. We have a really good graph that walks through this and illustrates it really well.

The truth is, the markets will fall. The markets will also rise. What does all of this mean for you, and how can you prepare yourself to weather the ups and downs of the stock market so you’re not giving yourself more gray hair?

1. You Should Always Plan for the Market to Fall

We always tell our clients: the market is going to fall and if you’re lucky, you’ll see several more recessions in your lifetime. You are going to watch your accounts decrease. And no, it won’t be fun. But by accepting that this will happen, you can create systems that allow you to weather the down markets and still be able to support yourself if you need money unexpectedly (which happens!).

One of the biggest challenges of a down market is when a client needs money, especially if they are in retirement or nearing retirement. This is why we at Guiding Wealth make sure to build a plan around what to do when the market falls. While plans may differ based on each client, knowing how to access money and having a strategy to fall back on are critical to success.

2. You Need to Commit to the Long Game

As we mentioned above, the markets can dip about 10% each year. Does that mean you’ll lose 10% on your investments each year? Not necessarily, but it’s a good benchmark to keep in mind. For every time the market falls, there is also an upswing. Watching the market fall is the price of being invested, but the returns are worth it when you keep the long game in mind.

3. You Will Have to Filter the News

There’s a common theme we see in our practice: our number of calls and meetings go up when the news cycle starts talking about “stock prices falling” or “another recession looming.” And while some of this is entirely real and should be talked about with your Certified Financial Planner™, it’s important to note that not all news media is reliable, and not all of it is helpful. Their goal is to increase readership or views, and the easiest way to do that is through fear. When you can translate what they’re saying through a “realistic lens,” you’ll be able to see what’s most relevant to you without worrying that the sky is falling. Of course, if you’re a client of ours and you have questions, you shouldn’t hesitate to call. Just know that the news media shouldn’t dictate your investment decisions.

4. You Can Trust in Diversification

We don’t know what the market’s going to do, but on any given day we know that some stocks will be up (and some will be down). That’s the beauty of diversification. When the markets fall, this diversification means that not all of your funds are going to be impacted the same way. For example, if the S&P 500 is down 10%, that doesn’t mean that your whole portfolio is down.

5. You Should Always Consider Your Risk Tolerance

Some of us are wired to handle risk a bit better; after all, some of us are perfectly fine with jumping out of an airplane with only a parachute strapped to our backs. But not everyone wants to do that. The same applies to your investments.

Are you OK with investing money in stocks that have the potential to lose money, but also have the potential to see massive growth? Are you a more moderate investor who wants to buy stock in companies that are more stable, and have a history of giving their shareholders a strong return? Or are you a conservative investor who doesn’t want to worry about how much the overall market is doing when you invest?

Your risk tolerance is going to guide how you react after you invest, so make sure you are upfront and honest with your Certified Financial Planner™ when you’re discussing where you’d like to put your money. If you invest out of alignment with your risk tolerance, you’re more likely to pull out money at a most inconvenient time.

6. You Should Know How Down Markets Affect Your Finances

Arguably the most stressful part of watching the markets fall is watching your account numbers fall, too. It’s important to understand that a down market will affect your timelines, especially if you’re nearing retirement or have a kid’s college tuition to pay for and haven’t planned for the market to fall. If you plan well, a down market shouldn’t dictate your plan — your plan should account for it. Working with a Certified Financial Planner™ can help you prepare in this way so your timelines aren’t majorly affected.

7. You Can Be Scared

Watching the markets fall can be scary. Those 10% (or more) drops are especially intimidating, especially for those nearing retirement or who are affected by a recession (i.e. layoffs, underwater mortgages, etc.). But the worst investment decision you can make is to sell when the market is down without a clear plan on what to do next. That’s why we’re here, and it’s also why you should always work with a Certified Financial Planner™ who can help you weather a storm. Because there will be storms. Can your CFP® professional see you through it?

8. You Should Know (and Feel) It Is Worth It

We’ll be honest: investing heavily in the stock market isn’t right for everyone. While many investments and asset classes do require you to invest in the stock market in some capacity, you don’t have to put all your eggs in that basket if it doesn’t align with your values or risk tolerance. Most of all, you should invest in the stock market because you feel it’s worth it.

Yes, the big market drops can be scary and yes, you’ll probably watch some of your hard-earned money “go away” in some cases. But the overall returns and results that come with investing your money far outweigh the cons. When you work with a Certified Financial Planner™ who understand what’s important to you and what you sort of outcomes you’re hoping to get from your investments, you can rest much easier knowing that you’ll get the returns you see.

Find a Professional Who Can Help You Set (and Maintain) Expectations

Part of seeking financial advice from a Certified Financial Planner™ is having someone to help you stay the course during the down times, and to help you make wise financial decisions during the good times. If you want to start investing (or get a better grasp on your current investments), you can contact Guiding Wealth. We’re a boutique financial planning firm that helps you understand your investments, make financial decisions that align with your values, and that can help you navigate the twists and turns of the stock market. Contact us today to set up a free consultation.